Business owners understand the need to go to dentists to get their teeth cleaned and to mechanics for car repairs, but yet they attempt to manage their employees internally instead of getting help.
“Managing the business of employment requires a completely different discipline and skill set from what is needed for the core business activity,” says William F. Hutter, CEO of Sequent. “Just because you are in the business of making widgets doesn’t mean you understand what it takes to be an employer in today’s environment. Rules and regulations relative to being an employer have changed a lot during the past 10 years.”
Smart Business spoke to Hutter about government regulations, employee retaliation and other issues involved with the business of managing people.
Why should companies pay more attention to employee management?
So many companies spend time on their communications budget for things like high-speed Internet and phones; that’s an insignificant portion of the total budget. For service companies, people represent 40 to 70 percent of the total cost of operations. It’s such a big segment, but no one seems to approach it appropriately because it requires a separate discipline. Issues relating to employees have a risk tail — it’s a contingent liability that can last three to five years after an event occurs. How many companies really know how to manage that liability? Small to midsize businesses don’t have the resources or expertise to do that and protect their biggest asset, which is their company.
What is involved in employee management?
There are common responsibilities that come with being an employer — compliance, wage and hour, health care reform, retirement plan fiduciary liability, workers’ compensation management, proper forms, reporting, employee file maintenance, etc. In professional practices, there are also issues regarding licenses, accreditations and certification; those are business drivers that contribute to your business success.
The hiring process, however, has nothing to do with what you’re passionate about and the business you opened; the business drivers for your specific discipline. Each new piece of legislation, each government-required form, each legal precedent set because of a lawsuit filed by a employee begins to change how you need to think about managing the business of employment.
In 2010 and 2011, retaliation charges became the most frequent complaints filed with the Equal Employment Opportunity Commission, surpassing race discrimination. An employee filed a complaint of some sort — harassment, hostile work environment — and then was terminated and filed a claim of retaliation. That retaliation claim is pursued by the government at no cost to the former employee. And 41 percent of all federal discrimination claims are charged against companies with 15 to 100 employees.
One of the newest areas for claims is in absenteeism and attendance. The Department of Labor has developed a free app employees can download to their smartphones and keep track of hours worked to see if they’re due overtime pay, which in essence is wage and hour enforcement at the employee level.
What can companies do to prevent claims?
Make sure employees are properly classified as exempt or nonexempt under wage and hour law. For example, to be exempt you must have hire or fire authority, supervise two or more people and be able to affect company policy. Not all professionals are exempt; it depends on the actual job task. For computer programmers, they have to be paid 6.5 times minimum wage per hour to be considered exempt. But fruit and produce delivery truck drivers are exempt because they are involved in interstate commerce.
Most companies don’t want to keep track of time because it requires monitoring by managers. But it’s a major liability and all it takes is one complaint to create problems.
Think about how to keep track of hours and reporting requirements of health care reform and look-back periods, or just one required form, the I-9 — there are 40 different fines that can be levied for that form alone. This shift in focus toward compliance and away from innovation has great cost to the business. That’s a cost of doing business and you need to move those tasks elsewhere because you never get that opportunity back.
William F. Hutter is the CEO of Sequent. Reach him at (888) 456-3627 or email@example.com.
Know what to ask a professional employer organization before hiring one with these 20 important questions.
Insights HR Outsourcing is brought to you by Sequent
In 2014, new entities will be part of the health insurance world — health insurance marketplaces.
Health insurance marketplaces are key components of the Patient Protection and Affordable Care Act (PPACA). They are designed to make buying health coverage simpler by providing easy-to-understand information that allows consumers to make apples-to-apples comparisons of a wide variety of products. Marketplaces are intended to make health coverage more affordable by promoting increased competition among health insurers under new market and product standards. In addition, certain consumers may be eligible for premium tax credits and cost-sharing reductions that will further reduce health insurance costs. Qualifying small employers also may be eligible for a tax credit.
“Health insurance marketplaces have the potential to increase consumerism in health insurance,” says Sheryl Kashuba, vice president, Health Policy and Government Relations, and chief legal officer for UPMC Health Plan. “However, employers need to understand how they will operate and who they will serve.”
Smart Business spoke with Kashuba about what employers need to know about health insurance marketplaces.
What is a public health insurance marketplace?
The public health insurance marketplace, sometimes referred to as an exchange, will comprise two new marketplaces where consumers and employers will be able to purchase health insurance. Coverage will be available to individuals via the Health Benefit Marketplace and to small businesses via the Small Business Health Options Program (SHOP) Marketplace.
In Pennsylvania, companies with 50 or fewer employees will be eligible to purchase on the SHOP in 2014 and 2015; in 2016 and beyond, employers with 100 or fewer employees may purchase on the SHOP.
In some states, the state itself will operate these public exchanges. In other states, including Pennsylvania, the federal government will operate federally facilitated marketplaces. In order to sell coverage on public exchanges, including on the federally facilitated marketplace, insurers must receive certification that their plans meet the requirements established by the PPACA for qualified health plans (QHP).
How does an insurer earn qualified health plan status?
A qualified health plan is a health insurance plan that has been certified by a marketplace as meeting certain standards; plans must receive QHP certification in order to be sold through a public marketplace. The certification standards include coverage of all essential health benefits, adherence to established limits on cost sharing such as deductibles, copayments and out-of-pocket maximum amounts, establishment of quality standards and a host of other requirements.
Who can purchase coverage through a public marketplace?
Most U.S. citizens and lawful residents will be eligible to purchase coverage on the health insurance marketplace. Any small employer meeting the employee limits established in its state may purchase coverage via the SHOP.
What is a private health insurance marketplace?
A private health insurance marketplace is run by a private sector entity, such as an insurer or broker. Private marketplaces may be designed to allow employers to control costs through defined contribution models and to allow employees expanded coverage options. These marketplaces also may offer a broad range of retail products, such as life insurance and even non-insurance products.
Must every employer purchase insurance from a marketplace?
No. While both the SHOP and private marketplaces will be designed to offer a variety of coverage options, some individuals and employers may prefer to continue to purchase coverage outside these new distribution channels. Employers will continue to have the option to do so. However, premium tax credits and cost-sharing reductions for individual market coverage and tax credits for qualifying small group plans will only be available through the public Health Benefit and SHOP marketplaces, respectively.
Sheryl Kashuba is vice president of Health Policy and Government Relations and chief legal officer at UPMC Health Plan. Reach her (412) 454-7706 or firstname.lastname@example.org.
Insights Health Care is brought to you by UPMC Health Plan
Data breaches are becoming more commonplace, causing millions of dollars in damages for companies that have personally identifiable information (PII) hacked by cybercriminals.
“Think about all of the losses you can incur. Not only do you have to hire a security expert to find what happened, you may be assessed fines or penalties by the merchant’s acquiring bank or payment card brand. In addition, you could be responsible for credit card charges made by the criminals and lose business because no one trusts you anymore,” says William M. Goddard, CPCU, principal, Insurance Advisory Services at Brown Smith Wallace.
Smart Business spoke with Goddard and Lawrence J. Newell, CISA, CISM, QSA, CBRM, security and privacy manager, about protecting companies from cybercrime.
How do cybercriminals access networks?
One typical method is spear phishing. Unlike traditional phishing attempts, which are fraudulent emails sent at random claiming to be from a reputable organization like a bank or eBay, spear phishing emails are sent to targeted employees or customers of a company.
The email appears to be coming from the company and requests that the recipient click on a link, which then goes to a fraudulent website. They may ask for personal information or they may launch a virus they’ll use to get into your network.
If you click on the link, it launches a program in the background that goes onto your workstation and canvasses the network for other vulnerabilities. The program collects data, whether that’s credit card information or other PII, and uploads it to the cybercriminal.
How can you reduce cyberattack risk?
The first thing to do is develop an information security policy, document it and disseminate it throughout the organization.
Other protective measures are:
- Conduct an inventory of authorized devices on your network. Guests can come into your place of business with a laptop and leave a device on your network that goes undetected. That device could have Trojan horses or viruses that, when executed, plant a program on your network.
- List an inventory of software allowed to run on workstations or servers. That helps when looking for rogue programs or software installations.
- Install an anti-virus program to detect malware. Anti-virus protection also needs to be maintained and updated for the latest definitions.
- Run vulnerability and penetration tests on servers and networking equipment to make sure you don’t have unnecessary services running that could lead to a vulnerability and potential unauthorized access.
- Prevent data loss by running programs to detect outbound calls or connectivity to remote sites that are not authorized to receive data output.
- Create security awareness within your company to ensure that people who have access to information are not sharing anything that is confidential or private.
- Develop an incident response plan to react to a breach and quarantine activity before it spreads throughout the network.
Companies think they’re protected because they are compliant with some standard such as PCI, but that’s no guarantee their systems will not be compromised. Your security program needs to go beyond PCI and focus on more than credit card information. Cybercriminals go after the easiest target along with whatever PII is available that has value. For instance, not-for-profit organizations may have names, addresses and checks with banking information; all of that information is valuable to somebody. For similar reasons, credit cards are often targeted because they’re so widespread and it’s the easiest information to sell.
What can companies do to protect against losses if they are hacked?
A variety of insurance policies cover things like the cost of fines, notification that PII has been compromised, liability and business interruption. All cyber policies are slightly different, and you have to be careful to buy the right coverage.
Businesses are smart enough to buy fire insurance in case a building burns down. Cyberattacks can be just as damaging, depending upon what happens and what information has been compromised.
William M. Goddard, CPCU, is principal, Insurance Advisory Services, at Brown Smith Wallace. Reach him at (314) 983-1253 or email@example.com.
Lawrence J. Newell, CISA, CISM, QSA, CBRM, is manager, Risk Advisory Services, at Brown Smith Wallace. Reach him at (314) 983-1218 or firstname.lastname@example.org.
Brown Smith Wallace can help you with cybersecurity. Visit them here to learn more.
Insights Accounting is brought to you by Brown Smith Wallace
Banks typically exclude export accounts receivable (A/R) and work in progress (WIP) from a company’s borrowing base, which can be challenging for a company with global sales that are rapidly growing or when a single large export order is received.
As a result, Export Working Capital loans were created by the U.S. Small Business Administration (SBA) to allow U.S.-based businesses to have access to a low-cost source of funds that support their international sales and manufacturing cycles.
“Through programs like this, the SBA — a taxpayer-funded federal agency — is putting our tax dollars back into the U.S. economy to promote retaining current jobs or even creating new jobs associated with international sales that otherwise could be won by foreign competitors,” says Arthur G. Rice, vice president and manager, International Operations and Product Management, FirstMerit Bank.
Smart Business spoke with Rice, as well as Romona Davis, vice president and SBA specialist, FirstMerit Bank about how these transactions work to enable small businesses to obtain funds for international sales and operations.
What are some benefits and how do these loans differ from others?
These loans are different from what you might call ‘standard’ operating capital line facilities in that the benefits are focused on international business. Under standard operating line facilities, the borrower is not permitted to include any A/R, WIP or inventory tied to foreign sales into its borrowing base calculations.
This restriction can severely limit the borrower’s ability to have access to sufficient working capital to allow the small business the ability to react quickly to significant market opportunities. These foreign opportunities can be encountered through trade shows, Web sales and foreign distributors. The ability to include foreign A/R, WIP or inventory may allow the small business to jump from 75 to 90 percent advance funding rates.
Who can apply for these loans?
Any for-profit organization whether organized as a corporation, sole proprietor or partnership that meets size standards as a small business can be eligible for the SBA. This program supports both manufacturing and service-oriented organizations and has many applications.
SBA Export Working Capital loans are granted for up to $5 million to fund export transactions from purchase orders to collections. There’s a low guaranty fee and quick processing time. The SBA also has two additional export loan programs — Export Express Loan Program and the International Trade Loan Program.
In addition to supporting ongoing exports, what else can Export Working Capital loans be used for?
Export Working Capital loans not only support your ongoing export business, but also can be used for:
- Issuance of standby letters of credit to support bid bond requests, cash down payments and warranty periods.
- Purchase of raw materials, components, participation at foreign trade shows and general export marketing activities.
- Collection of foreign A/R.
Are there any exclusions or conditions business owners need to keep in mind?
The SBA Export Working Capital Program is quite flexible and able to be utilized for most international sales opportunities. However, products to be exported must be more than 50 percent U.S. content and shipped from the U. S. There also are some specific restrictions based on federal regulations that your lender can make you aware of to help you stay in compliance.
What do you need to get started?
Along with the application and fee, you’ll need at least one year’s worth of financial statements and a brief history of your company, including senior management biographies and pro forma business plans. You also need a clear description of your proposed use of the working capital proceeds.
All opinions expressed herein are those of the authors/sources and do not necessarily reflect the views of FirstMerit Corporation.
Arthur G. Rice is a vice president, manager, International Operations and Product Management, at FirstMerit Bank. Reach him at (330) 384-7178 or email@example.com.
Romona Davis is a vice president, SBA specialist, at FirstMerit Bank. Reach her at (330) 996-6242 or firstname.lastname@example.org.
Learn more about FirstMerit’s International Banking export programs.
Insights Banking & Finance is brought to you by FirstMerit Bank
State and local governments and nonprofits that receive federal money often must complete Single Audits, also known as OMB A-133 audits. These ensure monies are spent properly according to the different program requirements, and that the relevant organizations only have to go through one consistent audit event.
However, the Office of Management and Budget (OMB) has proposed changes to the audit structure that could have direct and indirect impacts, including decreasing the number of organizations required to undertake a Single Audit.
“A lot of organizations may say, ‘this is great, I don’t have to pay for a Single Audit anymore,’” says Daniel L. Wander, CPA, director of assurance services at SS&G. “But if this does go through, they may need to react to it fairly early to determine what their funders are going to require in terms of any changes or additional procedures.”
Smart Business spoke with Wander about the proposed changes and their impact.
What are the proposed changes?
As of February, the OMB recommended that the annual spending threshold for federal funds that require an organization to have a Single Audit be raised from $500,000 to $750,000. This is partly because of inflation — the last threshold increase was in 2003 — and partly to increase efficiency. The American Institute of CPAs indicated last year that entities receiving less than $1 million in federal funds made up about 24 percent of the total Single Audits but only covered 1 percent of total expenditures. The audits for organizations receiving more than $3 million in federal funds, however, accounted for about 97 percent of total federal expenditures.
Once an organization determines it must undertake a Single Audit, major programs over a certain threshold undergo a compliance audit, at least on some kind of rotational basis, where the auditor renders an opinion. The OMB proposal also raises this threshold from $300,000 to $500,000.
Another change is the coverage rules for high risk and low risk auditees. Coverage means program dollars covered in the compliance audit as a major program. OMB is talking about reducing the coverage rules to 40 percent for high risk and 20 percent for low risk auditees, from 50 percent and 25 percent, respectively.
Finally, OMB wants to streamline the compliance testing areas from 14 to six, focusing on areas where money is going to be misspent, and putting a number of cost and administrative principle guides into one central document.
What’s the timeline on these changes?
The changes are still in proposal form, and the comment period has been extended to June 2. Therefore, the earliest the changes would be in effect would probably be beginning July 1, 2014, giving people a chance to plan.
What might be the impact of the changes?
The direct effect will be fewer entities required to have Single Audits. However, they will still need to follow federal rules and regulations, and could be subject to audits by either state or federal organizations that want to come in specifically.
A fallout may be more state or local entity involvement through audits or additional requirements in order to fulfill state or local monitoring responsibilities. Currently, these organizations get automatic easy oversight from receiving Single Audits each year.
What are some next steps for nonprofits?
First, if nonprofits have anything specific to say, use the extended comment period. Then, reach out at least to your major funders, usually state, local or county agencies, and open a dialog so there are no surprises. How do the funders think they will react? Will they be putting in additional requirements as part of their oversight?
A nonprofit’s costs may go down but it may need to reallocate. If a nonprofit is subject to a Single Audit, the cost can come from the federal portion of your budget. If somebody else is imposing certain audit costs, you’ll need to talk to that organization about where that’s going to be allowable. If Ohio is requiring something additional, it ought to be paid with state money.
Hopefully, no one begins to believe auditors won’t be looking at this anymore. You still have to comply with the federal regulations, and there’s a chance someone will look at your spending at some point.
Daniel L. Wander, CPA, is a director, Assurance Services, at SS&G. Reach him at (800) 869-1834 or DWander@SSandG.com.
Save the Date: You have until June 2, to provide comments on the proposed revisions to OMB Circular A-133 and related grant reforms. The OMB must receive comments electronically.
Insights Accounting & Consulting is brought to you by SS&G
Annual physicals can lead to early detection of serious health problems and set a course for better outcomes. Companies need to take the same mindset concerning HR and benefits compliance audits, says Meghann Guentensberger, Director of HR Services at Benefitdecisions, Inc.
“Don’t wait until something ‘hurts’ to try to figure out how to respond,” she says. “It’s better to know ahead of time so you’re protected if there is a disgruntled employee who files a complaint.”
Smart Business spoke with Guentensberger about HR and the benefits of compliance audits.
What areas are covered by HR and benefits compliance?
Compliance is two-pronged: There is the benefit piece, which encompasses the Employee Retirement Income Security Act (ERISA), Health Insurance Portability and Accountability Act (HIPAA), COBRA, etc. There is also the HR side, which deals with regulatory compliance such as federally mandated forms and notice postings, and making sure an organization has proper procedures in place to address and resolve discrimination issues and complaints.
Many companies fall short on compliance with the Fair Labor Standards Act regarding employee classification — whether employees are exempt or nonexempt, or are a contractor or employee. There are best practices and risk management considerations such as having all I-9 employment eligibility verification forms filled out correctly and filed separately. The penalty can range from $1,000 to $10,000 for a form that is incorrectly completed. Employers also must ensure that any protected health information documentation is not co-mingled with other employee-related documentation in the employee personnel files.
What is involved in a benefits and compliance audit?
There are three steps — discovery, evaluation, and assessment and recommendation. In discovery, you determine which areas may present the most risk. A third party conducting an audit will interview HR employees, evaluating practices and processes to determine if they are in compliance with the law.
In the evaluation stage, select policies or a random sampling of employee files are reviewed and compared to standards. This often provides insight into hiring, interviewing and employee relations procedures. Common problem areas include employment applications that contain impermissible questions. This can lead to a claim of discrimination by a candidate who was not hired for a position. Employee handbooks often contain sections that provide unnecessary risks to the employer. An audit can ensure that it provides the same information to all employees.
For the final step, a scorecard is developed that shows risks and potential associated costs of noncompliance, or savings as a result of compliance. The scorecard also identifies areas to improve.
How do you determine an audit’s value?
Some savings derived from audit findings are soft costs, because fines would only be paid if an institution such as the U.S. Department of Labor (DOL) conducts an audit and finds violations.
One of the more significant values of an audit is in showing employees they matter most. Staying compliant shows you’re providing best-in-class service and indicates the moral values of the company. It also can be very powerful when dealing with a complaint from a disgruntled employee.
How often should audits be conducted?
Conduct an audit at least annually, although non-discrimination testing for Section 125 cafeteria benefit plans should be reviewed twice each year.
Many companies establish policies but don’t review them. That’s fine until you have a scenario where a disgruntled employee files a complaint with the DOL.
Regulations change all the time, so you have to stay on top of compliance issues, which can be difficult. Small and midsize businesses would benefit most from hiring an independent third party to perform an audit because you need someone who knows what you don’t know.
Meghann Guentensberger is director of HR Services at Benefitdecisions, Inc. Reach her at (312) 376-0449 or email@example.com.
For additional Insights topics and events, visit Benefitdecisions' website.
Insights Employee Benefits is brought to you by Benefitdecisions, Inc.
Remote deposit capture is a treasury management service that allows your company to deposit checks immediately upon receipt by using an electronic scanner, without the need to visit a bank. It saves time, increases productivity and lets employees focus on areas that most benefit the business, using resources in the most cost-effective manner.
“Remote deposit capture reduces your transportation needs substantially. A courier may only need to travel to the bank once per week, as very few items need to go to the bank in paper form — an 80 percent reduction in transportation,” says Kerri Werschky, retail sales manager at First State Bank.
Smart Business spoke with Werschky about how remote deposit capture enhances your banking and business.
How can remote deposit capture improve your operations with time and cost savings?
By using remote deposit capture, substantial savings come from reducing your transportation expenses and allowing employees to focus on other tasks. Most items can be captured, with just a few that must be deposited in paper form at a bank. According to remotedepositcapture.com, a business depositing 10 checks daily to a bank 5 miles away, could save $722 on mileage, $3,930 on recovered labor, $393 on increased productivity and improve cash flow acceleration annually by using remote deposit capture.
This banking service also provides quality control when your accounting system directly receives the data. With this, businesses can access copies of prior transactions, save time and paper because deposit tickets aren’t needed, and still print reports identifying the day’s deposit.
How does remote deposit capture accelerate the collection process?
As payment technology evolves, remote deposit capture has become a fundamental part of the collection process that businesses should be using. Checks sitting in a drawer don’t help cash flow and availability of funds, especially if you are unable to drive to the bank daily to make deposits. You need to quickly process checks through the system for collection.
Remote deposit capture allows extended deposit cutoff times for same-day ledger credit and more flexibility. With the convenience of scanning and depositing checks electronically from your office, employees can easily incorporate the service into your daily business processes. No more rushing to the bank at the end of the day to beat the closing time. In addition, a company with several locations can consolidate banking relationships, even if a bank is not in the same geographic area.
How are remote transfers tracked?
Just by handling transactions through remote capture banking at your own office, you increase accuracy and control. As transactions occur and are finalized, you can keep a close watch on them through online banking. This secure information is convenient, which gives flexibility when transferring money and making payments.
You can make deposits from multiple and/or remote locations, and then centrally track deposit reporting and reconciliation. This consolidation gives businesses a chance to vastly improve payment reconciliation management and the ability to research prior deposits.
What has been done to reduce fraud with remote deposit capture?
Banks work hard to mitigate and manage the fraud risks related to check processing. Remote deposit capture reduces this risk, though, as returned check deposits can be recognized earlier with accelerated clearing.
However, it is vital that businesses also take precautions on their end. Put strong, effective control measures in place around remote deposit capture and check processing to limit exposure. Have written policies and procedures for employees to regularly follow, as well as established security measures for handling checks after scanning.
By utilizing a cost-effective remote deposit capture service in your business, you stand to gain a wide-range of benefits — accelerated clearings, improved availability, enhanced cash flow with better cash management, reduced return item risk, transportation savings and convenience, and the ability to consolidate deposits from multiple and/or remote locations — that all translates to better operations and more profitability.
Kerri Werschky is a retail sales manager at First State Bank. Reach her at (586) 863-9485 or firstname.lastname@example.org.
Insights Banking & Finance is brought to you by First State Bank
Most employers offer a defined benefit plan, where they select one or two health insurance options to offer their employees. This approach is being replaced by defined contribution plans.
“Under a defined contribution plan, the employer is choosing a fixed dollar amount for employees and they use this money to purchase their benefits. Employees can select from multiple options, not just the traditional one or two plans, and personalize their selections based on their needs,” says Mary Spicher, sales executive with JRG Advisors, the management arm of ChamberChoice.
Smart Business spoke with Spicher about utilizing defined contribution plans.
Why the shift to define contribution plans?
The shift is directly related to health care reform and an effort to reduce insurance costs. This is not a new concept; for the past 20 years most employers have used a defined contribution plan for retiree benefits. Retirees are given a defined amount of income to apply toward defined contribution 401(k) plans, removing employer risk and allowing employees to make investment decisions based on their needs.
In the 1990s, rising costs led companies to evaluate retiree health plans and cap the amount they pay for benefits. As costs continued to rise, companies declined to raise the capped amount, creating a defined contribution health plan. This has now migrated to active employee health plans.
How do these plans work?
Employers can control costs and keep expenses more predictable from year-to-year. A defined contribution plan creates a consumer-driven health plan where employees use the employer’s defined contribution to purchase health insurance specific to their needs. The employer can keep the defined contribution the same for all or use a tiered structure where employees pay the difference for more expensive plans and benefits. Exchanges, including benefit options with low to high deductible plans combined with a health savings account, copayments and ancillary products, were developed so employees can purchase plans with defined contributions.
An employer can change the defined contribution by a set amount annually, regardless of the actual plan increase, or simply keep it the same based on its financial stability. The decision to alter benefits plans — i.e. increase the deductible, change the copayments on medical and prescription drugs, etc. — is the employee’s responsibility.
What’s the effect on ancillary products?
The one-stop shopping through exchanges simplifies administration and allows employees to purchase ancillary products as part of their health plan. The convenience predicts substantial growth in everything from short- and long-term coverage to pet insurance.
Insurance is viewed as protection of an employee’s income and assets against unpredictable events. If employees get sick, they use their health insurance. If they need time off work for an illness or accident, they have short-term or long-term disability insurance. Some expenses for a serious illness like cancer might not be covered by the employee’s health plan. And, if the employee were to die from the illness, life insurance protects the family financially.
What does health care reform mean for the future of defined contribution?
Employers are deciding whether to continue to offer a health plan, and if so, what type, based on the new legislation and cost. So, employees may become more familiar with a defined contribution health plan through the public insurance exchanges. Products sold through the state or federal exchanges will be limited to essential health benefits or a benchmark plan for health, dental and vision. Health plans in a private health insurance exchange offer more inclusive coverage.
Bottom line, defined contribution is the future. Employers have been waiting to see how reform affects rising costs before changing their traditional thinking. Early indications predict that health care reform won’t eliminate increases, so providers still need to deliver more efficient care, especially with high-cost cases. However, defined contribution, consumer-driven plans are helping employers control their costs.
Mary Spicher is a sales executive at JRG Advisors, the management arm of ChamberChoice. Reach her at (800) 377-3539 or email@example.com.
Insights Employee Benefits is brought to you by ChamberChoice
A fully insured business will shop around with different health insurance companies for the best value, including a good network. However, self-funded health plans — which are growing in popularity — contract with a rental network that administers benefits with the help of a third-party administrator.
Smart network provider contracting will maintain lower costs and access to care for members. Many employers only look at the discounts for services in the contract, but there are other methods just as important when evaluating a network.
“There are always some things out of your control, but you try to manage the network and build in predictability to make sure you have control over it rather than the providers,” says Jamie Huether, regional vice president, Network Management, at HealthLink, which rents its network to self-funded entities.
Smart Business spoke with Huether about what to consider when evaluating a network contractor.
How can a network provider maintain lower costs?
A network provider employs a number of contracting methodologies to help health plan clients achieve the best rates. One is having as many fixed rates and as much charge master protection as possible, which limits exposure to provider changes. So, for instance, if a health care provider bills $3,000 for a procedure, and then increases it to $4,000, the network provider’s fixed charge of, say, $900 remains the same.
The alternative is reimbursement methodologies that pay a percentage of the billed charge, which rise as the bill increases. This fully exposes whoever is paying the claim to whatever the providers want to bill.
Why is the network with the highest discount not always the best option?
When evaluating networks, focus not only on the network discount but also the unit of cost, or what the service actually costs. Although the discount can look good, it doesn’t tell the whole story because providers don’t bill the same. Typically, hospitals owned by for-profit entities have a higher billed charge structure than not-for-profit hospitals. So, an appendectomy at a for-profit hospital may have a 75 percent discount for a final procedure cost of $15,000. However, the same appendectomy at a not-for-profit hospital might only have a 30 percent discount but just cost $9,000.
In addition, facilities make charge master — the master list of what they bill for services — changes throughout the year, depending on financial goals. These increases aren’t across the board because some service lines are bigger revenue drivers.
How does the network contractor work with self-funded businesses?
A self-funded plan sponsor contracts with a rental network to help manage costs and plan ahead. For example, one rental network used multi-year contracts to limit uncertainty and keep costs low. By offering stability to the health care providers, who also are trying to budget, it could mean a cost break.
A network contractor shares management reports with self-funded entities to show what they are spending at each facility and the average cost per day. The rental network also can report upcoming negotiations and cost increases that are locked in, giving businesses greater control.
When looking for a health network, what should you ask?
Health plan sponsors need to look for stable, broad networks with good geographic coverage. You don’t want to contract with a network where providers are coming in or out, or that doesn’t include one of the area hospitals. Businesses should ask:
- How much turnover is there in your network?
- Do you anticipate any major provider terminations in the next 12 months?
- What is the network doing with respect to transparency around costs for certain procedures, as well as being able to provide answers about quality?
Another factor is size — a network provider that does a lot of business can use that to leverage better rates from health care providers. Ask about additional services, such as customized directories, and how much help the network will provide to resolve issues related to the pricing of claims. Finally, determine how flexible the network is in addressing issues important to you.
Jamie Huether is regional vice president, network management at HealthLink. Reach her at (314) 923-6756 or firstname.lastname@example.org.
Learn more about HealthLink's broad network of contracted physicians, hospitals and other health care professionals on their website.
Insights Health Care is brought to you by HealthLink
Middle market manufacturers often think workers’ compensation and disability are uncontrollable costs items. However, it’s more important than ever to change this way of thinking.
“Workers’ compensation is a significant variable cost element for manufacturers,” says Joe Galusha, managing director and leader for casualty risk consulting at Aon Risk Solutions. “It’s an area where controlling workplace injuries and their associated costs can actually become a competitive advantage.”
“We’re coaching our clients to take more responsibility over workers’ compensation and disability prevention, as well as claim management,” says Mike Stankard, managing director, Industrial Materials Practice, at Aon Risk Solutions. “If they do, there’s a significant opportunity to lower costs, and with that comes boosts in productivity, morale and many intangibles.”
Smart Business spoke with Galusha and Stankard about why workers’ compensation and disability management is crucial as well as cost containment and reduction strategies.
What’s the manufacturing landscape today?
Post-recession manufacturing activity is increasing, partially due to repatriation. But with that comes payroll growth, and then typically growth in workforce costs, which for manufacturing can largely be workers’ compensation and disability. There’s also negative trends related to the profile of the typical American worker that will compound the current challenges, so manufacturers that don’t put more effort into managing injuries and related costs may be at a disadvantage.
What workforce demographic trends make this management so essential?
About one-third of adults and almost 17 percent of youth are obese, according to the Centers for Disease Control and Prevention. Obesity drives comorbidity and complexities in an individual’s health, creating a link to the cost of care and recovery from injury.
At the same time, workers 55 and older are expected to be nearly 20 percent of the workforce within a year. A number of physical impacts — decreased strength, more body fat, poorer visual and auditory acuity, and slower cognitive speed and function — come with aging and affect a workers’ ability to recover from injury. People over 60 also are much more likely to be obese.
These trends not only affect employment-related injury costs, but also productivity and business continuity costs when workers are absent for non-occupational injuries.
How can big data be used as a tool here?
There’s never been as much data available for a nominal cost — the challenge is leveraging it. You need the right data at the right time to compare it to the right things. When benchmarking against other companies or applying data sets to your environment, jurisdictions, evaluation base and the age of the benchmarking sources are important to ensuring your data is pure.
Although there are external sources, many times third-party administrators (TPA) or insurance carriers have already done a tremendous amount of data mining and predictive modeling. Businesses just need to know it’s there and to start using it to drill deeper into the cause of loss and the cost drivers of workers’ compensation.
What are some best practices for managing workers’ compensation and disability?
The secret is preventing injuries and creating a healthy workforce. But injuries will occur, so focus on responding quickly with the right amount of effort at the right time on the right claim. Predictive modeling can help identify the types of claims likely to become more costly.
Understand what’s driving your costs by doing a baseline assessment of cost drivers and utilizing benchmarking to drill down. Then, align the incentives of all internal and external parties — TPA, carrier, broker, and vendors involved in loss control and claims management — to focus on the cost-driving elements, using a dashboard to monitor performance. This creates a sustainable loss control and claims management effort.
Many organizations need to align all stakeholders — human resources, finance, legal, operations, etc. Also, combine the efforts of health and wellness with workers’ compensation and safety. A streamlined approach creates a healthier workforce, reducing injuries and their costs.
Joe Galusha is a managing director, leader for casualty risk consulting at Aon Risk Solutions. Reach him at (248) 936-5215 or email@example.com.
Mike Stankard is a managing director, Industrial Materials Practice at Aon Risk Solutions. Reach him at (248) 936-5353 or firstname.lastname@example.org.
Hear more expert advice about workers' compensation and disability management in manufacturing by visiting our archived webinar.
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